Exports were worth $32.89 billion in August last year and imports stood at $68.53 billion. (Representational image)
| Photo Credit: Getty Images/iStockphoto

India’s merchandise exports fell 4.83% to $32.11 billion in November. File photo
| Photo Credit: PTI

India’s merchandise exports fell 4.83% to $32.11 billion in November while the import bill jumped 27% to a record high of almost $70 billion, as per data released by the Commerce Ministry.

The trade deficit has also soared to a fresh all-time high of $37.84 billion, reflecting a 77.5% spike over the deficit recorded in November 2023.

This is the third time in four months that India’s import bill has hit a record high, but November’s tally surpasses the last two occasions by a wide margin.

In August, imports had hit a high of $64.34 billion, which was subsequently eclipsed by October’s tally of $66.34 billion.

Commerce Secretary Sunil Barthwal attributed the dip in merchandise exports to an unprecedented fall in petroleum products’ prices which have affected India’s oil exports. “Non-petroleum exports have grown at a comfortable pace and that is what we should be looking at,” he said.

Non-petroleum products exports were up 7.8% in November to touch $28.4 billion, while they have risen 7.4% between April and November this year to reach $239.7 billion.

November’s export performance comes after a surprise 17.25% spike in October, the fastest in 28 months, had lifted exports to the year’s second-best tally of $39.2 billion.

On a month-on-month basis, November’s exports are 18.1% lower.

Petroleum exports in November dropped about 49% but officials said that petroleum products’ export volumes had grown 9.6% between April and October, so the dip in export values is linked to the decline in oil prices alone.

Non-petroleum and services exports are going to sustain in the coming months and we are going to surpass the $800 billion export tally in 2024-25, Mr. Barthwal asserted.

Major shipping lines are avoiding the Suez Canal and are rerouting vessels around the Cape of Good Hope, which has increased time and costs for exporters. File
| Photo Credit: KK Mustafah

Sustained disruptions in the Red Sea route is likely to raise the freight and forwarding (F&F) cost by 25-30% for corporates largely dealing in international trade, a report by credit ratings agency Ind-Ra said on February 9. Moreover, the working capital cycle is likely to aggravate by 15-20 days, and the impact could be higher for sectors such as agriculture and textiles, report said.

Working capital cycle refers to the period between payments made to suppliers and revenue received from sales.

Med-sized entities to be hit

The report also said that pressures on cash flow, although moderate for large entities, will further increase borrowings, especially for sectors such as iron and steel, auto and auto ancillaries, chemicals and textiles, which have seen a year-on-year rise in net leverage in the first half of the current fiscal.

“The challenge is significant for the entities having low value addition therefore thin margins. Although large entities have adequate elbow room to accommodate such incremental cost, delays and disruptions in supply chains will be key factors to watch for,” said Soumyajit Niyogi, Director, Core Analytical Group, Ind-Ra.

For medium-sized entities, he said, the challenge is two-fold, both cost and supply, and consequently on working capital cycle. “These entities have not benefited much from the softening of commodity prices, as free cash flow has remained sluggish for most of them,” he stated.

The initial reaction can be seen in freight rates rising by 150% in the past 45 days, the rating agency said. The route constituted 40% of the total oil imports and 24% of the total exports during April to October 2023, it said.

Major shipping lines have rerouted vessels around the Cape of Good Hope, which has increased time and costs, impacting both exports and imports, as per the report. This detour adds 12-15 days to voyages on a business as-usual basis; however, there could be a further delay owing to any sudden operational challenges, it said.

This detour is directly translating to a higher operational cost, along with freight and insurance and intermittent disruptions on account of ship size and cost dynamics. Although these disruptions have historically been short lived, a swift resolution seems improbable given the geopolitical standing, Ind-Ra said.

Important trade route

As much as 20-25% of India’s foreign trade is routed through the Suez Canal, with key products such as crude oil, auto & auto ancillaries, chemicals, textiles and iron & steel being affected. Indian exports are facing higher shipping costs due to rerouting, leading to reduced export volumes, affecting small and medium-sized enterprises dealing with a high volume of low-value products.

On the import side, vital commodities such as crude oil, fertilisers, and electronic components face inflated costs due to the crisis, leading to higher landed prices and inflationary pressures, impacting various sectors of the Indian economy, the ratings agency said.

New Delhi:

Apple, Dell, HP, Samsung and Lenovo are among 110 firms authorised by India to import laptops, tablets and personal computers under a new system aimed at monitoring shipments, two government sources said.

Acer, Xiaomi, IBM and ASUS have also been issued import authorisations, the two sources said, under India’s new “import management system” effective from Wednesday.

India announced the new system for laptops, tablets and personal computers last month after it rolled back an earlier plan to impose a licensing regime, following criticism from the industry and Washington.

Companies must register the quantity and value of imports on a portal, with an authorisation valid until September 2024.

India’s union trade ministry did not immediately respond to a request for comment. The sources declined to be named as details of the authorisations have not yet been made public.